SoftBank's Son finds more love for early-stage investing, new fund planned

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03/10/2019 | 06:17pm EDT

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SEOUL/TOKYO (Reuters) - SoftBank Group Corp has expanded its appetite for early-stage startups, with a venture capital unit set to launch its biggest fund for early investments as it opens new offices in Asia.

The global fund from newly rebranded Seoul-based SoftBank Ventures Asia will be worth as much as $500 million and could launch next month, its CEO JP Lee told Reuters in an interview.

By contrast, the average size of similar funds raised last year was just over $100 million, according to data provider Preqin.

SoftBank, South Korea's National Pension Service as well as other companies and asset management firms will provide funding, Lee said, declining to provide further details on investors.

"It's an important signal within the SoftBank Group that SoftBank thinks early-stage investments are important and will make continued efforts on them," said Lee.

In addition to the $100 billion Saudi-backed SoftBank Vision Fund that has made big investments in firms like Uber, SoftBank said on Thursday it was launching a $5 billion fund focused on Latin America.

The bigger remit for SoftBank Ventures Asia, which describes itself as the group's global arm for early-stage investing, came after a successful presentation to SoftBank founder and CEO Masayoshi Son last October, Lee said.

Tasked by Son to explain why the SoftBank should keep investing in early-stage startups, Lee on a visit to the group's Tokyo offices invoked the words of Alibaba Chairman Jack Ma: "small guys become big guys".

In doing so, he harkened back to Son's most spectacular startup jackpot - his 2000 investment of $20 million in the Chinese e-commerce firm. SoftBank's current Alibaba stake is worth around $130 billion.

Three months later, SoftBank Ventures Korea was relaunched as SoftBank Ventures Asia and it now plans to open offices and hire investment managers in Singapore and Shanghai. It currently has teams in Seoul, Beijing, San Francisco, and Tel Aviv.

Son provides guidance while individual investment decisions are made by Lee and his team, Lee said. The unit declined to comment on how many new people may be hired.

The unit was born in 2000 at a boom time for South Korean startups, expanding its focus beyond that country in 2011. Around half of its investments have been early stage.

SoftBank Group and its portfolio companies also make early-stage investments. Many of these are not disclosed by SoftBank and lack of clarity on their valuations complicate investors' efforts to quantify SoftBank's worth, said Dan Baker, an analyst at Morningstar.

The new fund, called the SoftBank Acceleration Fund, follows the launch of a $300 million China-focused fund in September. The unit, which has $1.1 billion under management, had until then focused on funds worth under $200 million.

To date, the unit has taken stakes in over 250 companies across 10 countries, including South Korean gaming company Nexon Co, which listed in Japan in 2011, and Indonesian e-commerce firm Tokopedia.

It currently concentrates on firms involved in artificial intelligence, connected devices and robotics.

In keeping with Son's practice of promoting ties between portfolio companies to boost their growth, Lee said Singapore-based used car trading platform Carro, which the unit has a stake in, had been introduced to SoftBank portfolio company Grab for potential collaboration.

And another company it has invested in, camera app operator Snow China, is using technology from artificial intelligence firm SenseTime.

SoftBank and its Vision Fund have invested more than $600 million in SenseTime, valuing it in the most recent round at $7.6 billion, a source familiar with the matter said, declining to be identified because the information is not public. SenseTime declined to comment.

(Reporting by Hyunjoo Jin in Seoul and Sam Nussey in Tokyo; Additional reporting by Julie Zhu in Hong Kong; Editing by Edwina Gibbs)